Consider the Following Scenario When Answering the Following Questions

question 107

Multiple Choice

Consider the following scenario when answering the following questions:
Your friend Jon is starting a new photography business that specializes in photographs of Central Park in New York City. Because his business is new and risky, he is unable to obtain a loan from the local bank. On June 21, 2017, you agree to pay a price of $4,000 for a bond from Jon. You will receive $5,000 in return on June 21, 2018.
-The face value of the bond mentioned in the scenario is equal to

• A) $9,000.
• B) $1,000.
• C) $4,000.
• D) $5,000.
• E) $20,000.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to reduce the total receivables reported to reflect only the amounts expected to be collected.

Bad Debts Expense

Bad debts expense represents the loss that a company anticipates or realizes from customers who are unable to pay their outstanding balances.

Uncollectible Accounts

Refers to receivables that a business has determined are unlikely to be collected due to customer default.

Aging

A method used in accounting to categorize a company's accounts receivable according to the duration of time an invoice has been outstanding.